The Dow Jones ended last week on a positive note as
we got a strong rally despite some concerning data. The University of Michigan consumer
sentiment report missed forecasts across the board by a big margin once again.
The bearish signs keep on accumulating with the recent hawkish tone from Fed
speakers and the softening labour market data with the big misses in the recent
NFP report
and the rising Continuing Claims. The
buyers should be very careful going forward.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones last
Friday broke above the key trendline and the resistance around
the 34100 level. Given that it wasn’t supported by any bullish catalysts, this
breakout might turn into a fakeout, so the buyers must be extra careful going
forward.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more closely the
breakout. In case we get a pullback into the broken resistance, the buyers will
likely step in with a defined risk below the resistance turned support and
target another extension to the upside. The sellers, on the other hand, will
want to see the price breaking below the support to confirm the fakeout and
pile in for a drop into new lows.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the Friday’s
rally is diverging with
the MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, if we get a pullback, the buyers should pile in around
the support, but if the price breaks below it, the reversal would be confirmed,
and the sellers will regain control.

Upcoming Events

This week we have some top tier economic releases. We
begin tomorrow with the US CPI report which is going to be one of the most
important events of the week. On Wednesday, we have the US Retail Sales and PPI
data, while on Thursday we conclude with the latest US Jobless Claims figures.

This article was written by FL Contributors at www.forexlive.com.

Major currencies are not doing much so far on the session as the overall market mood remains rather tentative to start the new week. Treasury yields are little changed while equities are displaying a more mixed picture in European morning trade. Regional indices are higher but playing catch up to Wall Street gains on Friday, while US futures are pointing lower as investors check back after the Moody’s downgrade on the US outlook after the close last week.

That is not leaving much for FX to work with, as the dollar sits little changed and more mixed at the moment. USD/JPY continues to hold just a touch higher at 151.73 while EUR/USD is also up 0.1% to 1.0688, though the latter is holding within just a 20 pips range today. Talk about a snoozer, eh?

It’s all about key US data releases coming up later in the week and I reckon we won’t get much action later today as well. The consumer price inflation report tomorrow is the big one to watch of course, as traders will use that as a guide to reaffirm any biases from last week.

For now, it’s shaping up to be a slower and diffident start to proceedings this week. Here’s the snapshot at the moment in FX (which is not much different from when we began the day here):

This article was written by Justin Low at www.forexlive.com.

• Prior +10.3%
• New yuan loans ¥738.4 billion vs ¥665.0 billion expected
• Prior ¥2.31 trillion

After a big jump in new loans at the end of Q3, there is a bit of a dip in October (likely seasonal factors) but it comes in above estimates. This is also still higher than the same period a year ago, which saw ¥615.2 billion in new loans then. Overall, it still shows that China is maintaining support for the economy as outstanding yuan loans are seen roughly 11% higher than October last year.

This article was written by Justin Low at www.forexlive.com.

UPCOMING EVENTS:

• Monday: Japan PPI.
• Tuesday:
  UK Jobs
  data, German ZEW, NFIB Small Business Optimism Index, US CPI.
• Wednesday:
  Japan
  GDP, Australia Wage data, China Industrial Production and Retail Sales, UK
  CPI, US PPI, US Retail Sales, PBoC MLF.
• Thursday:
  Australia
  Jobs data, US Jobless Claims, US Industrial Production, NAHB Housing
  Market Index, New Zealand PPI.
• Friday:
  UK
  Retail Sales, Canada PPI, US Building Permits and Housing Starts.

Tuesday

The UK unemployment rate is expected to
remain unchanged at 4.3% in the three-month period to September and the
employment change to contract by 198K. The average earnings including bonus are
seen at 8.3% vs. 8.1% prior, while the average earnings excluding bonus are
expected to remain unchanged at 7.8% vs. 7.8% prior.

There’s no consensus at time of writing
for the US headline CPI data. The Core CPI Y/Y is expected to hold steady at
4.1% vs. 4.1% prior,
while the M/M reading is seen at 0.3% vs. 0.3% prior. The Fedspeak has been
leaning on the hawkish side since the last FOMC meeting and although the market
expects the Fed to keep rates steady until the mid-2024, we might see another
rate hike if the upcoming two CPI reports fall short of their expectations and
show persistently elevated underlying inflation. The whole reaction function
will need to be paired with the NFP report in December of course as another
notable
miss and increase in the unemployment
rate will keep the Fed on the sidelines.

Wednesday

The Australian Wage price index for Q3 is
expected to increase by 1.3% vs. 0.8% prior for the Q/Q reading and 3.9% vs.
3.6% prior for the Y/Y figure. The RBA
recently hiked by 25 bps citing
surprisingly persistent services inflation. The central bank is keeping the
door open for further tightening as it left in the statement the line “whether
further tightening of monetary policy is required to ensure that inflation
returns to target in a reasonable time frame will depend upon the data and the
evolving assessment of risks”.

The UK CPI Y/Y is expected to fall to 4.8%
vs. 6.7% prior,
while the M/M reading is seen at 0.1% vs. 0.5% prior. The Core CPI Y/Y is
expected at 5.8% vs. 6.1% prior and the M/M figure at 0.4% vs. 0.5% prior. The BoE
has kept rates steady for two consecutive meetings and it will be harder for
them to do so at the next one as well if this week’s employment and inflation
data beats expectations.

The US Retail Sales have been surprisingly
hot in the past few months, but this time around the data is expected to show a
decline of -0.1% M/M vs. 0.7% prior.
Although, the data is unlikely to change the Fed’s stance, the central bank
won’t be pleased with too hot figures.

Thursday

The Australian employment change is
expected at 18K vs. 6.7K prior
with the unemployment rate ticking higher to 3.7% vs. 3.6% prior. Although the
labour market has been showing signs of cooling, it remains historically tight,
and the RBA would like to see more softening.

The US Jobless Claims lately have been
pointing to a softening labour market via lower job opportunities rather than
more layoffs. In fact, Continuing Claims have been rising steadily while
Initial Claims remained subdued around the 200-220K level. There’s no consensus
at the time of writing for this week’s data, but as always it will be one of
the most important releases.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Fitch and S&P have already downgraded the US and now Moody’s has taken a step in that direction. The credit ratings agency maintained the USA’s top Aaa rating but changed its outlook to ’negative‘.

• Downside risks to the US‘ fiscal strengths have increased and may no longer be fully offset by the sovereign unique credit strengths
• Expects that the US‘ fiscal deficits will remain very larger, significantly weakening debt affordability
• Sees US debt affordability to decline further, steadily and significantly, to very weak levels vs other highly-rated sovereigns
• Political polarization in Congres raises risk successive govt not able to reach consensus on plan to slow decline in debt affordability
• US can carry a higher debt burden than other countries

The current US funding package goes until November 17 (next Friday) and I strongly suspect that will underscore some of the concerns from Moody’s.

This article was written by Adam Button at www.forexlive.com.

• US November prelim UMich consumer sentiment 60.4 vs 63.7 expected
• Fed’s Daly: Policy is in a very good place
• Yellen: We have not seen an impact on the Treasury market from the ICBC attack
• Yellen-He meeting readout: US seeks healthy economic relationship with China
• From earlier: Lagarde says rates cuts not coming for at least “the next couple of quarters
• Biden and Xi to meet next week, engage in ‚in-depth discussions‘
• Fed’s Bostic: There’s still more work to be done on inflation

Markets:

• Gold down $21 to $1936
• US 10-year yields up 2.2 bps to 4.65%
• WTI crude oil up $1.64 to $77.38
• S&P 500 up 1.4%
• EUR leads, JPY lags

There was a stark contrast to what was happening in the stock market and elsewhere. The finishing FX moves on the day were limited with modest volatility throughout. USD/JPY tracked up towards the top end of the range and that will be something to watch next week but there was no real threat of breaking the recent high of 151.74.

However equity markets roared higher in non-stop bidding after the first hour of trading. There was no indication of what was to come in the futures market as it was only fractionally higher as New York woke up. One powerful story may have been Nvidia’s end-around on the Chinese chip blockade as all chip companies surged but, ultimately, the rally was much broader than that.

Interestingly though, European markets didn’t take part and there was no help from Treasury yields, which were higher led by the front end.

Some support for the US dollar came from the UMich consumer sentiment report, which included hot inflation metrics. That, and some buying of USD into the fix, sent the dollar to the daily extremes on a few pairs but the bump was limited to 20 pips and faded later.

CAD did get some independent support as oil prices rebouned and the risk trade improved but that was only enough to erased earlier declines.

Have a great weekend. Next week features US CPI and retail sales, which will certainly be market movers.

This article was written by Adam Button at www.forexlive.com.

The major stock indices are closing near session highs with the NASDAQ index leading the way. All 3 major indices are closing above their 100-day moving averages (bullish). All 3 indices are closing higher for the week.

A snapshot of closing levels shows:

• Dow industrial average +391.16 points or 1.15% at 34283.09. Its 100-day moving average is at 34266.16
• S&P index up 67.87 points or 1.56% at 4415.23. Its 100-day moving average is at 4402.54
• NASDAQ index up 276.65 points or 2.05% at 13798.10. It’s 100-day moving averages at 13618.08.

For the week, each of the major indices close higher for the 2nd consecutive week:

• Dow Industrial Average rose 0.65%
• S&P index rose 1.31%
• NASDAQ index rose 2.37%

Big gainers this week included:

• Roblox, 10.06%
• Broadcom, 8.48%
• Lam Research +8.10%
• Uber, 8.02%
• Nvidia, +7.4%
• Snowflake, +7.01%
• Intuit, +6.09%
• Adobe, +5.95%

Looking at the Dow 30 for the week:

• Apple rose 5.52%
• Microsoft rose 4.78%
• Disney rose 3.75%
• Salesforce rose 2.98%
• JP Morgan rose 2.41%

Loser in the Dow 30 were:

• Walgreens, -6.11%
• Chevron, -3.15%
• J&J -2.70%
• Merck, -1.89%
• HomeDepot -1.38%

This article was written by Greg Michalowski at www.forexlive.com.

Here is a great chart snapshot from BMO showing how Fed pricing has changed in the past year. Most of 2023 involved the market buying into the idea of higher-for-longer Fed funds but since October 18, there has been a fresh attempt to price in rate cuts, despite ongoing hawkish Fed rhetoric. That came after a series of softer US economic data points, including the ISM survey and non-farm payrolls.

This article was written by Adam Button at www.forexlive.com.

Yesterday’s poor 30-year Treasury auction reverberated through the market but later in the day, many people were arguing that it should be ignored because a ransomware attack kept China’s largest bank — ICBC — out of bidding.

Yellen now says there was no impact on the Treasury market from the attack. Could she mean that there’s been no direct impact?

Whatever happened, US 30-year yields are back to where they were before the sale.

This article was written by Adam Button at www.forexlive.com.

Cash funds continuing to attract inflows, set for record year – BofA

FULL STORY

Global investors continued to pour money into cash funds in the week to Wednesday, as higher yields on short-dated debt put cash funds course for record inflows this year, according to Bank of America and data provider EPFR.

BofA’s weekly ‚Flow Show‘ report showed cash funds attracted $77.7 billion of inflows in the week to Nov. 8, putting them on track to see around $1.4 trillion of inflows in 2023.

This article was written by Ryan Paisey at www.forexlive.com.